{"id":29120,"date":"2022-12-16T07:15:00","date_gmt":"2022-12-16T12:15:00","guid":{"rendered":"http:\/\/www.businesspundit.com\/?p=29120"},"modified":"2022-12-16T12:58:12","modified_gmt":"2022-12-16T17:58:12","slug":"the-inflation-of-higher-education","status":"publish","type":"post","link":"https:\/\/www.businesspundit.com\/the-inflation-of-higher-education\/","title":{"rendered":"The Inflation of Higher Education"},"content":{"rendered":"

How far does a university degree get you?<\/strong> If you think you’ll automatically earn a better job, status, and higher pay, congratulations. You’ve bought into the myth.<\/p>\n

Higher education in America is a bubble. There are exceptions, of course. What Big 3 consulting firm can argue with a Harvard MBA? But by and large, the trend is clear.<\/p>\n

\"\"<\/a><\/p>\n

This bubble, according to Agora Financial’s Eric Fry<\/a>, is rooted in a belief:<\/p>\n

Once upon a time, a college education in America was a one-way ticket to a high-paying job and a lofty socio-economic status. Part of its value derived from the fact that a college education was relatively rare. In 1950, only about 5% of all Americans held a bachelor\u2019s degree.<\/em><\/p>\n

Since this 5% tended to fare so much better than the rest of the American population, lots of folks began to ask themselves, \u201cWhy not send as many kids as possible to college?\u201d<\/em><\/p>\n

The number of Americans with college degrees has increased fivefold since 1950, according to Fry. Meanwhile, the amount families pay for a higher education has \u201cskyrocketed 439 percent since 1982. Normal supply and demand can’t begin to explain cost increases of this magnitude,” writes to the Washington\u2019s Examiner\u2019s Glenn Harlan Reynolds<\/a>, quoting an article in Money Magazine.<\/p>\n

\"\"<\/a><\/p>\n

Two things are behind this increase:<\/p>\n

1) Easy Money<\/strong><\/p>\n

Sallie Mae, the student lending powerhouse initially formed as a government-sponsored enterprise in the 1970s, made it easy for students, many with poor to no credit, to get their hands on billions of dollars in federally insured student loans.<\/p>\n

Fry writes:<\/p>\n

According to FinAid.org, the total amount of money Americans have borrowed on government and private student loans at $830 billion has surpassed the total American consumer balance on credit cards, only $827 billion.<\/em><\/p>\n

Media reports indicate that many of these students don’t clearly understand the terms of their loans. Once they graduate college, they’re shocked by higher loan payments than they can afford.<\/p>\n

Yet higher education<\/a> is one of the most profitable business markets in the country. No school, whether government-run, non-profit or private, benefits from teaching students how to choose an affordable degree before they actually go out and get one.<\/p>\n

For example, there’s no point to spending $100,000 on a Harvard degree in, say, social work if your employers a) don’t care where your Masters is actually from, and b) your salary will only go as high as $40,000 per year. Students should always make sure the math adds up<\/a> before<\/em> getting a degree. But that\u2019s not something openly promoted in the marketplace. And why would it be?<\/p>\n

The belief that a college education automatically gets you a higher-earning job also “spawned myriad scholarship programs (and) a college-construction boom,” writes Fry:
\n
\nWere it not for Sallie Mae, aspiring college graduates could never have borrowed far more money than they could ever hope to repay; universities could never have begun to believe that they are worth what they charge; professors could never have obtained their coddled lifestyles and the cost of a college education could never have appreciated well beyond any connection to its true economic value.<\/em><\/p>\n

Despite this, universities perpetuate the belief that every degree they offer is equally valuable.<\/p>\n

2) A Proliferation of Colleges<\/strong><\/p>\n

Online universities, especially for-profit ones, have proliferated in recent years. Non-traditional students–stay-at-home parents, people seeking a second career, students who don’t qualify for traditional universities, etc.–find online universities especially compelling. They comprise an influx of people getting degrees.<\/p>\n

For-profit colleges operate under one rule of thumb: He who markets the hardest, gets the most business. Efforts range from recruiters\u2019 compensation being tied to enrollment numbers<\/a> to a relentless affiliate online marketing effort (Google “online colleges<\/a>” and you’ll see what I mean).<\/p>\n

For-profits also avoid failing students. They need to keep their customers happy. In many cases, students pay a lot of money (or take on a lot of debt) for their degrees. They expect to pass. It’s not in the school’s best interest to fail students, or even give them marginal grades.<\/p>\n

Yet issuing degrees to incompetent students devalues degrees in general. If anyone can get a degree, what exactly does it prove? As the percentage of the workforce with college degrees has gone up, degrees, with some exceptions, have become less valuable.<\/p>\n

Indeed, according to this<\/a> AZ Central article:<\/p>\n

Nationally, for-profit schools had the highest share of defaults in the United States in 2007: 11 percent. Community colleges had a nearly 10 percent rate, and private, non-profit universities had the lowest rates, at 3.7 percent, according to the U.S. Department of Education.<\/em><\/p>\n

School officials say for-profit colleges serve an important role. Like community colleges, they have more-lenient admission standards and attract larger percentages of students in economic need: lower-income, minorities and older than 25. Officials say this explains why more students struggle with repaying student loans.<\/em><\/p>\n

In other words, the for-profit system has attracted many students who can\u2019t afford their education, but get degrees anyway.<\/p>\n

What\u2019s the Real Value of a Degree?<\/strong><\/p>\n

The Washington Examiner’s Glenn Reynolds<\/a> says there are threes ways a college education can help people make more money:<\/p>\n

First, it may actually make them more economically productive by teaching them skills valued in the workplace: Computer programming, nursing or engineering, say.<\/em><\/p>\n

Second, it may provide a credential that employers want, not because it represents actual skills, but because it’s a weeding tool that doesn’t produce civil-rights suits as, say, IQ tests might. A four-year college degree, even if its holder acquired no actual skills, at least indicates some ability to show up on time and perform as instructed.<\/p>\n

And, third, a college degree — at least an elite one — may hook its holder up with a useful social network that can provide jobs and opportunities in the future.<\/p>\n

While an individual might rationally pursue all three of these, only the first one — actual added skills — produces a net benefit for society. The other two are just distributional — about who gets the goodies, not about making more of them.<\/em><\/p>\n

But many universities, especially for-profit ones, don\u2019t want you to know that.<\/p>\n","protected":false},"excerpt":{"rendered":"

How far does a university degree get you? If you think you’ll automatically earn a better job, status, and higher pay, congratulations. You’ve bought into the myth. Higher education in America is a bubble. There are exceptions, of course. What Big 3 consulting firm can argue with a Harvard MBA? But by and large, the […]<\/p>\n","protected":false},"author":9,"featured_media":29121,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[25],"tags":[6464],"class_list":{"0":"post-29120","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-higher-education"},"acf":[],"wps_subtitle":"","_links":{"self":[{"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/posts\/29120","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/comments?post=29120"}],"version-history":[{"count":2,"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/posts\/29120\/revisions"}],"predecessor-version":[{"id":79950,"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/posts\/29120\/revisions\/79950"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/media\/29121"}],"wp:attachment":[{"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/media?parent=29120"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/categories?post=29120"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.businesspundit.com\/wp-json\/wp\/v2\/tags?post=29120"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}